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Strategic and Tactical Decisions

Strategic and Tactical Decisions

By Oleg Nikoforov

The Problem of Development of Shtokman Field has Many Components.

Recently the message regarding the decision on suspension of Shtokman gas field development for indefinite period was covered by all mass media. The source of this message, as British BBC agency writes, was the member of Gazprom Board of Directors Vsevolod Cherepanov. The agency quotes his following comments: “All the parties came to agreement, that the expenses are too high to make this at the given stage”. And further: “Earlier in 2014 there shall be no final investment decision on the project”. The reason, as he said during the interview to Reuters agency is “high cost of the project, due to difficult conditions in this Arctic region”.

There were plenty of speculations regarding the reasons for such decision. Let’s remind, that Shtokman field situates at Russian shelf of Barents Sea about 600 km to North-East from Murmansk. This is of the biggest world gas fields. To various estimations investments into its development can cover 15-20 billion USD. In 2010 the project was postponed due to reduced gas consumption in the world. Primarily gas supplies from Shtokman field along the gas pipeline should have started in 2013, and a year after it was planned to launch tankers with condensed natural gas (CNG) to American market. Yet three years ago “Gazprom” by 2020 planned to cover 10% of CNG in the USA. But active development of shale gas within the territory of the USA, which allows Americans not only to assure itself with blue fuel, but also to become its exporter, seems have completely buried these plans. But we can’t ignore the activity of “greens”, who already have managed to prevent shale gas development in Western Europe. The USA also possesses pretty strong anti-shale opposition. One shouldn’t forget that Shtokman gas was also defined as a resource base for supplies of gas along the pipeline “Nord Stream” into the countries of West Europe. We can allow that it was suppose to fill in new planned branches of "Nord Stream" gas pipeline.

What is the reason for such Gazprom decision? Naturally it is a changing situation at the world gas market due to coming to it of the USA as well as Qatar, which actively develop CNG production. First of all it is a global crisis, which as suggested, shall reduce blue fuel consumption in the world. Entering of Russia into the global crisis encourages saving financial resources, and most likely this is the reason for refusal of the government to provide for Gazprom tax preferences by development of this field.

Except for that it's understood that absence of own financial resources in Gazprom the only available source of finances remains to be increase of taxes. And this shall incite negative reaction of people and business as well.

Problem is also the terms of production, as the region is peculiar with complicated arctic conditions, far distance from shore and significant depth. And this demands unique production and transportation technologies, which Gazprom doesn't possess. Briefly, they need partners and Gazprom has been busy with it for a long time. It needed partners possessing technologies as well as financial resources to develop the field... Already in September 2005 they composed a list from five foreign companies - potential participants of the field development consortium - Hydro and Statoil (Norway), Total (France), Chevron and ConocoPhillips (USA). But on October 9th 2006 however Gazprom announced that none of these companies was able to present the funds, "respective in the scope and quality to the stocks of Shtokman field". In this respect, Gazprom decided to become independent subsoil user, and powerful international companies shall be attracted only as contractors. Yet only French company Total (25%) and Norwegian Statoil (24%) remained to be the partners of Gazprom on the project.

Although, now they try to clarify or even refute Gazprom's declaration. Thus a representative of Russian agency on subsoil using Piotr Sadovnik declared only about postponement the beginning of Shtokman field operation from 2013 or 2014 to 2018. And Gazprom's partner Тоtаl at all refuted information that development of Shtokman field is delayed for indefinite period. As the company declared, ITAR-TASS reports, at the moment partners are busy studying the ways of increasing economic efficiency of this project due to extreme growth of expenses on its development. Judging by all, in the management of Gazprom they lead an acute struggle between supporters and opposers of the project.